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This Basket Case of Coalition Blunders

How refreshing it was to see Opposition Leader, Bill Shorten come out on the front foot as he did this week. But his belief that Prime Minister, Tony Abbott will be a ‘oncer’ is not going to happen automatically. I can’t remember a Party or an Opposition Leader being given a better rebuilding opportunity following an election loss than Labor and Bill Shorten. But clawing back 22 seats in 2016 is an enormous task and will require not just huge internal discipline, but sound policies and skilled media management as well.

Shorten has unsurprisingly expressed his amazement at how Tony Abbott has squandered his political capital in so short a time frame. This has happened because neither Abbott nor his Coalition ‘team’ were ready to govern. They squandered the last two years firing off negative round after round at Labor’s internal squabbles, at debt and deficit, at getting rid of the carbon tax and they did it without giving any serious thought as to the implementation of their own plans. Their own plans are a shambles, from economic management to foreign relations, from education to the environment, from an inferior NBN to border control. It is a shambles. They were given, and continue to receive, a free ride with the media who seem to have abdicated their role as the fourth estate in favour of sensationalism and selective reporting. In addition, the Coalition’s good fortune resulting from Labor’s own goals left them complacent about how they would actually run the country. Once they won government, ideology took over from common sense (as it does), and the result is a shambles. All this in just four months!

Given sufficient time they could well take us to war with Indonesia, dismantle one of the finest health schemes in the world and give up the opportunity of sound and equal education for our children into the future. And with such plans as their Paid Parental Leave Scheme and Direct Action they threaten to expand John Howard’s middle class welfare waste to such a level as would even embarrass John Howard. Not only do these schemes make a mockery of Joe Hockey’s ‘age of entitlement’ philosophy, but in the process, they could well send our economy into free fall.

Odd as it may sound, this basket case of Coalition blunders, has handed Labor’s its biggest weapon to enable them to return to government: The economy. But I don’t think they realise that yet.

I am not an economist, but to be able to understand Australia’s current financial position, I don’t need to be. In fact, not being an economist is an advantage. I’m not burdened with all the detail associated with balancing a budget. Economists often can’t see the wood for the trees. They are given the numbers and from there they suggest, recommend, propose, fiddle and estimate (usually badly), the disbursement of the numbers and project the end result. In today’s macro-economics, that’s not hard if everything happens the way it’s supposed to and there are no surprises along the way. The trouble is it rarely happens that way. Over estimating revenues and under estimating spending is an occupational hazard.

In 2007, Kevin Rudd’s Labor government inherited a $20 billion dollar surplus and a debt free economy. Within 12 months, the GFC exploded and the spaghetti hit the fan worldwide. To avoid a looming economic disaster in Australia, the government embarked upon two generous stimulus programs that kept enough money in circulation to allow the good ship Australia to continue steering a steady, if not, uncertain course forward. It worked. It blew the $20 billion surplus out the window and added twice that amount to the debt register, but it worked. It did include some spectacular errors in budget estimates though, and in an increasingly uncertain forward outlook, showed that Treasury didn’t always get it right. Treasury works to a formula but acknowledges it is a balancing act. However, during the post GFC period while other less prudent economic managers around the world had been borrowing like there was no tomorrow and were not able to erect a buffer between debt and collapsing revenues, the good ship Australia, as a direct consequence of those stimulus measures, kept on cruising and comparatively speaking, our financial position remained sound and in check.

Now, let’s go back and see how the then opposition shadow Treasurer, Joe Hockey reacted to those stimulus initiatives. By doing that, we will be able to compare how his thinking then, compares with how he thinks today.

In 2009, our economy was growing at 0.6% and the May budget forecast unemployment to rise from 6% to 8.5%. By September 2009, after the second stimulus had filtered through, employment had improved and unemployment had dropped back to 5.8%. At the time, Hockey said “The proof today in the accounts, is that the money being spent over the next four years by the Rudd government will be about politics and not about economics. The outcome today is proof positive that Australia is resilient and capable, and if we continue to spend money the way the Rudd government is, we will have higher taxes and higher interest rates. Today’s a warning bell for Mr Rudd.” Did you get that? Joe was warning that continued spending would result in higher interest rates and higher unemployment. Read Crikey report here. So Joe was saying we should stop spending now. But we couldn’t just stop spending. Programs were in play that couldn’t just stop. Joe, however, continued relentlessly with his dire warnings culminating with his claim in 2013 that Labor’s reckless spending had created a budget emergency.

But in 2013, our unemployment rate was still 5.8% and our growth rate also unchanged at 0.6%, compared with 2009. Over the same period interest rates have actually fallen from 3.0% to 2.5%. And, there was no significant change in circumstances between 2009 and 2013. So, I guess it’s safe to say that Wayne Swan got it right and Joe Hockey got it wrong.

Now read what Joe said when he realised this. In June, 2013 Joe Hockey said, “I would not be doing my job if I had not already given some thought as to how economic activity could be safeguarded should the downturn in the private sector become more protracted. In that case additional well considered government action could be appropriate.” He was saying this because Treasury had advised him that the once-in-a-century mining boom was unwinding and the economy would need a serious injection of money to take up the slack. In other words Joe was saying stimulus spending was on the table. Why? Because he realised he was shortly to become Treasurer and there was a downturn in the private sector; Kevin Rudd’s stimulus money had run its course, but it had worked.

So now we are in 2014 and Joe is Treasurer. To his credit, as Treasurer, he is now seeing the economy with more circumspect eyes and is not planning to kill the goose with any sudden swing of the axe. But, there will be cuts; nasty, mean spirited cuts, robbing Peter to pay Paul. The Commission of Audit’s chairman, Tony Shepherd has revealed that they are struggling to meet their deadlines of January and March but have indicated that nothing will be off the table. That will make life interesting for all those in government who assured us that the GST, Health and Education would not be ‘on the table’. But it’s unlikely their final deliberations will amount to much. I suspect it will be a similar episode to that which we witnessed when Ken Henry released his tax reform recommendations to the Rudd government in 2010. Most of those recommendations were dumped. But as for net savings, they might as well whistle Dixie if they think any of their recommendations will turn the budget around. The post mining, reduced revenue, stream will still have to be offset with continued borrowings. Returning the budget to surplus is a pipe dream and it’s a pretty long pipe.

And here lies the rub. As opposition shadow Treasurer, Joe may have, but certainly should have, known that. Yet he continually lambasted Wayne Swan and did everything he could to convince the voters that we were in a budget emergency. It was, at times, an impressive piece of theatre. This convinces me that the Coalition is suffering a mental log jam at the moment. They are floating idea after idea out there in voter land to see what works. It is populist politics at its most shameful and demonstrates all too clearly that they don’t know what to do.

Their past blustering is coming back to bite them and Labor should be diligently preparing to launch a counter attack and make sure they give back at least as much as they got. They owe Wayne Swan that much and it’s not as if they will be short of ammunition.

When Parliament resumes in late February they need to be ready. Not to sit back, have a rest and take 12 months off before firing the first salvo. They need to be ready now. As Amanda Vanstone said this week in her swipe at Cory Bernadi, “Anyone can get in the ring and hurl abuse. Winning votes is another matter altogether.” Just as her column in the Age on Monday 20th January is a warning to the government of the dangers ahead, so too should Labor recognise that winning back government will require showing a united front and exposing a flawed government practising a flawed ideology.

John Kelly blogs at: The View from my Garden.

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11 comments

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  1. PeterF

    Let us remember that the ‘post mining’ revenue reduction should be described better as the ‘post MINING CONSTRUCTION’ revenue stream. The mines will now be in production and will not have tax deductions allowed in the construction phase. Once these are removed (‘spent’), taxes should at last start to roll in from mining. THIS is why Abbott wants to remove the MRRT.

  2. FSM is coming.

    Who the hell is Bill Shorten???

  3. allenmcmahon

    @FSM

    Bill Shorten is the slimy git who wanted the people whose votes he controlled in the Labor caucus to vote for Rudd in the last leadership spill while he voted for Gillard. He is also the guy the the rank and file did not want as party leader.

    I

  4. God Help Us

    Who the hell is Bill Shorten???

    He’s my local taxidermist.

  5. Vera

    Some comment here is quite juvenile.
    I found the article to be almost stating the obvious.
    What could have been an almost impossible task for Labor to get back in near future has been enabled; by Abbott’s own plans which are ‘a shambles, from economic management to foreign relations, from education to the environment, from an inferior NBN to border control’.

    From a comment seen and kept: ‘Abbott achieved the leadership of the Liberal party with the skinny margin of a single vote, and has lied, yelled, pleaded and jeered with, at, and through anything that has stood in his way in order to become Australia’s 28th Prime Minister. He was aided and abetted by the Murdoch media, a coterie of shock jocks and various reactionary supporters, who are also backers of the extreme right wing think tank the IPA — The Institute of Public Affairs.
    But since ‒ and before ‒ his victory, Abbott has often appeared increasingly befuddled, bemused, inconsistent and bewildered. Having got to the pinnacle, his face betrays the mind of a man wondering: Hell, what do I do now…’ -L. Bender

  6. John Kelly

    Reblogged this on THE VIEW FROM MY GARDEN and commented:

    The Coalition’s past blustering is coming back to bite them and Labor should be diligently preparing to launch a counter attack and make sure they give back at least as much as they got. They owe Wayne Swan that much and it’s not as if they will be short of ammunition.

  7. Truth Seeker

    John, yes indeed, but I still believe that Shorten is the wrong man, and in the mean time we have Abbott representing us on the world stage which I find personally offensive 😯

    and the only credible thing that he could say is “I’ll see your GFC, and raise you a homegrown recession!” 😯

    I’ll see your GFC, and raise you a homegrown recession!

    Cheers 😀

  8. Paul Raymond Scahill

    Well it would seem as though these words were penned by someone who understood exactly what was Australias future. The mining infrastructure was a ploy by all mining companies as a deliberate diversion to dupe the public (along with help from the de-facto treasurer) that it realised no tax. Do not worry this crowd will find a way to extract an equivalent amount of money, by hook or by crook. With all their skull duggery they wiill try and convince the gullible public that they are the only party (ha-ha) that can fix the current situation. This is probably true as they will be the only ones who know all their mistakes. And I agree, we require a leader of people, not Bill Shorten if we are to get out of this quagmire.

  9. lawrencewinder

    Good article. Though, perhaps it could be titled “The Blundering Basket Cases of the Coalition?”

  10. John Fraser

    <

    @ JOHN KELLY

    Most Australians didn't need economists to tell them that domestic inflation was up.

    But thats exactly what happened today … 2.7%.

    Then the news went on to say that people would be disappointed that Rates would not go down.

    Home loan variable rates 4.62%

    Never been a better time to purchase or lock into variable rates.

    And the only thing that the Abbott gang is responsible for after 4 months is domestic inflation @ 2.7% .

  11. gumleafdi

    Great article – couldn’t agree more. Blunderers and clowns, not worthy to represent us here or on the world stage.

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